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Chapter 08:

E-Commerce
Objectives
• Define e-commerce and understand its role as a
transaction processing system
• List the three types of e-commerce, and explain
how e-commerce supports the stages of the
buying process and methods of marketing and
selling
• Discuss several examples of e-commerce
applications and services

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Objectives
• Define m-commerce, and describe several m-
commerce services
• List the components of an e-commerce system,
and explain how they function together to
provide e-commerce services

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Chapter Content
• The Roots of E-Commerce
• Overview of Electronic Commerce
• E-Commerce Applications
• Mobile Commerce
• E-Commerce Implementation

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Electronic Commerce
• Electronic commerce (e-commerce)
– Systems that support electronically executed
business transactions
– The fundamental purpose of e-commerce is to
execute transactions

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Electronic Commerce
• Electronic commerce (e-commerce)

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Electronic Commerce

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E-Commerce History
• EDI
– Uses private communications networks (VANs) to
transmit standardized transaction data between
business partners and suppliers
• Automating transactions using EDI
– Drastically reduced the amount of paperwork and the
need for human intervention
• Internet
– Provided the ideal platform for conducting EDI
transactions
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E-Commerce History

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Transaction Processing
• Transaction
– An exchange involving goods or services
• Transaction processing system (TPS)
– Information system used to support and record transactions such as
paying for products or paying an employee (e.g. payroll system that calculates
an employee’s pay and cuts a check)
– transaction processing systems share a common set of activities called the transaction
processing cycle
• Batch processing
– Transactions are collected over time and processed together in batches
– useful in situations where transactions take place away from the computer
system
• Online transaction processing
– Takes place at the point of sale
– critical to time-sensitive transactions such as selling concert tickets and making flight
reservations

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The Transaction Processing Cycle
• Data collection
– The process of capturing transaction related data
• Data editing
– Checking the validity of data entered
• Data correction
– Implemented if an error is found in the entered data

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The Transaction Processing Cycle
• Data manipulation
– Processing transaction data
• Data storage
– Altering databases to reflect the transaction
• Data output
– Receipts, picking lists, and other documents

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The Transaction Processing Cycle

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Different Transaction Processing for
Different Needs
• Order processing system
– Supports the sales of goods or services to customers
– Arranges for shipment of products
• Purchasing system
– Supports the purchase of goods and raw materials
from suppliers

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Different Transaction Processing for
Different Needs

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Types of E-Commerce
• Business-to-consumer e-commerce (B2C)
– Connects individual consumers with sellers , cutting out
the middleman
– E.g. Amazon.com
• Business-to-business e-commerce (B2B)
– Supports business transactions on across private
networks, the Internet, and the Web
• Consumer-to-consumer e-commerce (C2C)
– Connects individual sellers with people shopping for used
items
– E.g. ebay.com

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Types of E-Commerce

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E-Commerce from the Buyer’s Perspective
• Process of buying or acquiring goods or services
– Realizing a need
– Researching a product
– Selecting a vendor
– Providing payment
– Accepting delivery
– Using product support

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E-Commerce from the Buyer’s Perspective

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E-Commerce from the Seller’s Perspective
• Sellers business practices
– Market research to identify customer needs
– Manufacturing products or supplying services that
meet customer needs
– Marketing and advertising to make customers aware
of available products and services

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E-Commerce from the Seller’s Perspective
• Sellers business practices
– Providing a method for acquiring payments
– Making arrangements for delivery of the product
– Providing after-sales support
• Supply chain management
– From the seller’s perspective, the process of
producing and selling goods
– Involves three areas of focus: demand planning,
supply planning, and demand fulfillment
• Demand fulfillment: process of getting the product or service to the
customer

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E-Commerce from the Seller’s Perspective

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Benefits and Challenges of E-Commerce
• Buyers enjoy the convenience of shopping from
their desktop
• B2C e-commerce
– Levels the playing field between large and small
businesses
• Challenges
– Established businesses must alter systems and business
practices
– Security, privacy, reliability: E-commerce can survive only
if all involved can trust the system
– Social concerns

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Benefits and Challenges of E-Commerce

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E-Commerce Applications
• E-Commerce
– Playing an increasingly important role in our personal
and professional lives
– Allows us to discover new and interesting products
– Allows us to find better deals
– Used to monitor bank accounts and transfer
electronic funds

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Retail E-Commerce: Shopping Online
• E-tailing provides customers with
– Product information
– The ability to comparison shop
• E-tailing options
– Set up an electronic storefront
– Lease space in a cybermall
• Web site that allows users to browse through a wide
variety of products offered by several different retailers

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Retail E-Commerce: Shopping Online

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Online Clearing Houses, Web Auctions,
and Marketplaces
• Provide a platform for businesses and individuals
to sell their products and belongings
– www.ubid.com
• Provides a method for manufacturers to liquidate stock
and consumers to find a good deal
– eBay.com
• Most popular auction/marketplace

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B2B Global Supply Management
and Electronic Exchanges
• Global supply management (GSM)
– Businesses can find the best deals for raw materials and
supplies needed to manufacture their products on the
global market
• Electronic exchange
– an industry-specific Web resource created to provide a
convenient centralized platform for B2B e-commerce
among manufacturers, suppliers, and customers
– Promotes cooperation between competing companies

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Marketing
• Web is used for
– Unsolicited advertising
• Banner: A rectangular area embedded in the Web page content
for advertising, often across the top of the page
– Access to product information through business Web
sites
• Get better deals and make informed decisions
– Market research
• Traditionally done by interviewing customers
• Market segmentation divides customer opinions based on
various criteria
• E-commerce allows market segmentation to take place on an
individual level

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Marketing

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Banking, Finance, and Investment
• Online banking provides
– Convenient access to bank balance information
– Ability to transfer funds, pay bills, and obtain account
histories
• Electronic funds transfer
– Popular for paying bills and receiving paychecks
• Online brokerages
– Able to execute trades fast, within seconds

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Mobile Commerce (M- Commerce)
• A form of e-commerce
• Takes place over wireless mobile devices such as
– Handheld computers and cell phones
– takes place in emerging technologies such as dashtop
computers embedded in automobile dashboards
• Presents unique opportunities and challenges

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Mobile Commerce

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M-Commerce Technology
• Technologies and standards
– Wireless Application Protocol (WAP)
• a communication standard used by developers to create m-
commerce applications
– Wireless Markup Language (WML)
– Infrared or Bluetooth wireless networking technology
• Near Field Communications (NFC)

• Open Mobile Alliance (OMA)


– Hundreds of mobile operators, device and network
suppliers and companies have joined together to create
standards and interoperability between mobile devices

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Types of M-Commerce Applications
• Methods for delivering m-commerce services
– Directly from cell phone service providers
– Via mobile Internet or Web applications
• Location-based m-commerce applications
– Using Short Message Service (SMS) text messaging or
Multimedia Messaging Service (MMS)
– Using short-range wireless technology, such as
infrared
• Proximity payment system

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Types of M-Commerce Applications

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E-Commerce Implementation
• Implementing e-commerce
– Requires large investment and expertise
• E-Commerce host
– A company that takes on some or all of the
responsibility of setting up and maintaining an e-
commerce system for a business or organization

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Infrastructure
• E-Commerce requires significant infrastructure
changes
• Businesses must have employees who are
technically savvy
• B2C e-commerce
– Often connects manufacturers directly with
consumers, cutting out the middleman
– Requires shipping individual products directly to
consumers

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Infrastructure

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Hardware and Networking
• Underestimating the amount of Web traffic
– Leads to network stalls and long wait times
• Typical e-commerce Web site
– Employs one or more server computers and a high-
speed Internet connection
• Outsourcing to a Web hosting company
– Can operate 24 hours a day, 7 days a week
– Load-balancing

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Software
• Web Server Software
– Responds to requests for Web pages
• Web Server Utility Programs
– Provide statistical information about server usage
and Web site traffic patterns
• E-Commerce Software
– Supports e-commerce activities
– Includes catalog management, electronic shopping
cart, and payment software

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Software
• Web Site Design Tools
– What-you-see-is-what-you-get (WYSIWYG)
applications or wizards
• Graphics Applications
– Design and create graphic elements of Web sites
• Web Site Development Tools
– Application programming interfaces (API’s)
• Allow software engineers to develop Web-driven programs

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Software
• Web services
– Programs that automate tasks by communicating
with each other over the Web
– Systems developers can provide tools for automating
trivial or repetitive tasks
– Important in transaction processing

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Building Traffic
• The 3Cs Approach
– Content, community, and commerce
• Keywords and Search Engines
– Choose name and product names that best describe
business purpose and features
– Select descriptive domain names
– Business-related keywords can be listed in the HTML
meta tag
• Read by search engines and servers, but not displayed on
the page

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Building Traffic
• Marketing
– Online advertising methods include banner ads, pop-
up ads, and e-mail
– market segmentation: customer opinions are divided
into demographic variables such as race, gender,
income, education, and age to determine which
segment a product appeals to most
– Offline advertising methods include magazines,
newspapers, radio, and television

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Building Traffic

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Electronic Payment System
• proximity payment system
– allows customers to transfer funds wirelessly between their mobile
device and a point-of-sale terminal
• Electronic cash (e-cash or digital cash)
– Provides a private and secure method of transferring funds from a
bank account or credit card to online vendors or individuals
– PayPal
• Best-known e-cash provider
• E-cash benefits
– Privacy - hides account information from vendors
– Convenient if seller cannot process a credit card
• Smartcards
– Credit cards with embedded microchips that can store and process
data and can be used as electronic wallets

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Electronic Payment System

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Electronic Payment System

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International Markets
• Internet users of all nationalities will have access to your
products
• First consideration of a global e-commerce strategy
– Visitors of all nationalities and cultures should feel comfortable
while viewing your Web content
• Costly approach
– Create multiple versions of your Web site, each in a different
language
• Once the international market is won over, e-tailer faces
other challenges
– Foreign Currency, shipping, national taxes

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E-Commerce Security Issues
• There are significant privacy and security
concerns
– Public network
– No buyer or seller identity verification
– Hacker attacks

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E-Commerce Security Issues
• Digital certificate
– A type of electronic business card
– Attached to Internet transaction data
– Verifies the sender of the data
– Provided by certification authorities
– Encryption
• Uses high-level mathematical functions and computer
algorithms to transform data so that it is unintelligible to
all but the intended recipient

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E-Commerce Security Issues
• Securing data in transit
– Secure Sockets Layer (SSL)
• Digital certificates combined allows for encrypted
communications to occur between Web browser and Web
server
– Transport Layer Security (TLS)
• A URL associated with this begins with https
• Allow for encrypted communication to occur between
browsers and servers
• Secures usernames, passwords, credit card information

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E-Commerce Security Issues

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Business Resumption Planning
• Great pains are taken to ensure that transaction
processing systems remain in working order
• Business resumption planning (BRP)
– Takes into account every possible disaster and
provides courses of action to minimize negative
effects
– The goal is to protect data and keep key systems
operating until order is resumed

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Summary
• E-Commerce
– Systems that support electronically executed
transactions
• Transaction processing system (TPS)
– Supports and records transactions
• Three main types of e-commerce
– Business-to-consumer (B2C)
– Business-to-business (B2B)
– Consumer-to-consumer (C2C)

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Summary
• Retail Web sites
– Allow consumers to comparison shop
• Mobile commerce
– A form of e-commerce that takes place over wireless
mobile devices
• E-Commerce
– Requires investment in networking, hardware, and a
wide variety of software
– Requires changes in infrastructure

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